To simultaneously improve the strength and ductility of the Mg-10Gd-3Y alloy, we propose a new processing route: conventional extrusion (EX), followed by an equal channel angular pressing (ECAP) deformation, without stopping. The new process is called: extrusion-shearing (ES). By employing ES at 400 °C, the tensile yield strength of the Mg-10Gd-3Y alloy was increased to 289 MPa, together with a high ultimate tensile strength of 361 MPa, and a good tensile elongation to failure of 27.4 %, at room temperature. The underlying mechanisms for the simultaneous enhancement in strength and ductility were investigated. The extra shearing deformation by the ECAP-stage of the ES testing led to the formation of a fully recrystallized homogenous microstructure with an average grain size of 4.3 µm, with dynamic precipitation of Mg5(Gd,Y) particles at/near grain boundaries. Both macro and micro texture characterizations indicated a strong decrease in the intensity of the crystallographic texture during the ECAP part of the ES process, and a new type of texture. The multicomponent nature of the obtained texture and the microstructural modifications together with a dispersive distribution of precipitates contributed to an excellent combination of high strength and ductility of the Mg-10Gd-3Y alloy processed by ES.